Dowlais Group (DWL) H2 2023 earnings summary

Executive summary

• Strong execution delivered adjusted operating profit growth of 10% at constant currency, 30bps margin expansion and £93m adjusted free cash flow, ahead of expectations.

• Confidence in the medium-term outlook supported plans for a share buy-back of up to £50m; statutory results included a £449m non-cash goodwill impairment.

Financial highlights

• Adjusted revenue rose 6.3% at constant currency to £5,489m; adjusted operating profit increased 10% to £355m, with a 6.5% margin, up 30bps.

• Excluding £32m of incremental stand-alone plc costs, adjusted operating profit rose 20% at constant currency to £387m and margin expanded 90bps to 7.1%.

• Statutory operating loss was £450m, including a £449m goodwill impairment; adjusted profit before tax was £264m and statutory loss after tax was £495m.

• Adjusted basic EPS was 13.8p; statutory basic loss per share was 36.0p.

• Free cash flow was £45m; excluding £48m of non-recurring demerger costs, adjusted free cash flow was £93m.

Outlook and guidance

• 2024 revenue is expected to be similar to 2023 at constant currency, with a modest H1 decline offset by H2 improvement from new programme launches.

• 2024 operating margins are expected to expand and free cash flow to grow; operating profit and cash generation are expected to be H2 weighted.

• Automotive expects further margin expansion in 2024 and targets adjusted operating margin above 10% over the medium term.

• Powder Metallurgy expects 2024 revenue similar to 2023 and adjusted operating margin of ~10%; Hydrogen revenue is expected to grow.

• 2024 net finance costs are forecast at £100m–£110m, interest payments at £80m–£90m and restructuring cash outflows at £90m–£100m.